New York Society of Security Analysts, one of the nation's largest
organizations devoted to advancing the quality of security analysis,
has halted its public forums examining management's responsibility to
shareholders at public companies.
The society is reacting to concerns
within its top ranks that the forums had taken too aggressive an
approach, according to people close to the board.
The two-year-old program of forums
recently spotlighted the financial information provided by Amazon.com,
especially its extensive use of pro forma figures, which omit such
ordinary business expenses as interest, taxes and depreciation. Forums
focusing on Lone Star Steakhouse and Saloon and Computer Associates
were in the works.
The suspension comes as investors,
securities regulators and members of Congress are questioning whether
Wall Street analysts are up to the job of providing investors with
unbiased, rigorous analysis of public companies' prospects. There is
fear that brokerage firm research has been corrupted by analysts'
eagerness to write glowing reports to help win lucrative investment
banking business for their firms.
The board of the society, a not-
for-profit group with 8,000 members, shut down the forums because
member attendance had fallen off recently, said Jeffrey L. Evans,
recently installed as the society's president. Mr. Evans said he could
not provide attendance figures for the forums.
Mr. Evans is an analyst at the Advest
Group. Before joining Advest, he was a managing director and senior
analyst at BlueStone Capital Partners, a small New York firm which
sold its investment banking and brokerage business to Whale
Securities, another small brokerage firm, in March.
The New York Society, founded in 1937
by Benjamin Graham, revered author with David L. Dodd of the book
"Security Analysis," has been largely silent on the issue of analyst
conflicts. In a statement on Monday announcing his appointment as
president, Mr. Evans said: "The individual and collective behavior of
investment professionals is gaining attention among regulators and in
the media. Through Nyssa, we can provide a forum to shed some light on
these important issues."
But now shelved are shareholder rights
issues at two companies planned for examination by the society's
corporate governance committee. Lone Star Steakhouse and Saloon, a
chain of steakhouses based in Wichita, Kan., had been on the agenda
after shareholders disenchanted with the performance of management
voted earlier this month to remove Jamie Coulter, the company's
chairman, from the board. The Lone Star forum began independently, but
was picked up by the governance committee in late June after The New
York Times reported erroneously that the society was a co-sponsor of
Computer Associates, a Long Island
software company that is the subject of a proxy fight, was also on the
In addition to shutting down the
forums, the society has removed from its Web site all information
relating to the four forums conducted the last two years. Gary Lutin,
an investment banker at Lutin & Company in New York, and co-sponsor of
the forum program since 1999, declined to comment about the
withdrawal. Mr. Lutin said he would continue to support the forum
program with other organizations.
Ken Bertsch, director of corporate
governance for TIAA-CREF, the big institutional investor, said the
forums had played a useful role. "They don't want to take sides, they
want to raise issues in a broad way and for educational purposes," he
said. "They've been hitting the issues that are of concern,
particularly the pro forma numbers."
Mr. Evans said that the society might
have new forums in the future. "But what form it takes I can't tell
you right now," he said.
Jerry Flum, president of Credit Risk
Monitor in Floral Park, N.Y., and a longtime member of the society who
participated in the Amazon forum, said he was dismayed to hear that
the program had been discontinued. "Who is going to represent the
interest of the investor groups if not the New York society?" he